The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1887-03-02
MADE CLEAR AS DAY.
WALL STREETS "PUT8," CALLS"
"SPREADSy AND "STRADOLES."

Ingenious Speculative Devfces-A Con
fdential Clerk Explains Them to an
Inqufzsng Novice.
Mr.. Russell Sage was the pioneer who in
vented puts, >" calls" spreads" and ''strad-
dies He began dealing in them when he
first came to Wall street in 1861, after his
withdrawal from congress. and he has been
dealing III them ever since; and the stock
markets of the world have taken up this in
geniOus speculative device of Mr. Sage's, and
stock privileges are just as well known on the
continental bourses to-day and in the London
market as they are here, and they are largely
dealt in. Perhaps not 50 largely as here, be
cause the device is American and an outcome
of American genius, but transcontinental
spectators could not fail to see the advant-
ages they offered and have perforce adopted
them. London declares that the nomencla-
ture, so far as Spreads and "straddles' are
concerned, is not refined, and call them differ
emily, but what they deal in are American
stock privileges just the same.
MADE AS CLEAR AS DAY.
"And what are puts calls spreads and
'straddlesg" asked the writer when he first
went down on Wall street.
well" said John E. Mccain, the conf
Dental clerk of Russell Sage, of whom the
question was asked, "IH tell you if you if
you promise never to mention the pOetical
subject again. 1t requires pretty deft word
ing to make the thing clear, so it is not an
exhilarating subject to talk on. You hear a
good deal about puts and calls but ven
ture to say there are so, 900 persons in the
United States who do not know what they
are, nor what the meaning is of the word
privileges Now privilege is a contract by
which the maker of it, Russell Sage, S. V.
Waite, Jay Gould or Harvey Kennedy, en-
cages to purchase from the holder in the one
case, or to sell to the holder in the other case,
a number of shares of some specified stock,
at a certain price at any time within a GER
tain period at the option of the holder. Got
thatl"
A "CALL" EXPLAINED.
"A cali is privilege bought of the maker
at a certain price, and the owner of it is priv
ileged to caH for a certain amount of stock at
a given price within thirty, sixty or ninety
days, four or six months. If man holds a
put he has the right to deliver TO the maker
of the privilege a stock at a certain agreed on
price within a certain number of days. Cleari
No. Well, let's try ones more.
Suppose Western Union is selling at TO- A
man wants sixty day put on it at IS, be-
II.
gives Mr.. Sage, Mr.. White, Mr.. Kennedy or
Mr.. Gould per cent. on the amount of stock
he wants to deal in. A hundred shares is
usual, and per cent. is 800. He receives in
return a slip of paper signed by either one or
the other of these gentlemen. Then if West
ern Union goes below &C within sixty DAYS,
he may buy it for whatever it is selling for
below that price and put it to the maker of
the privilege at the price agreed on, 66, and
receive a check for sc, 800. The holder makes
the difference. All, you understand If
telegraph does not go below 66 the holder is
out his 500. The cali business operates ex-
actly in the opposite way. A man buys the
of calling Western Union at rs
when it is selling at 20. If it sells above rs,
you can cali on the maker of the privilege for
100 shares at IS, and the 100 shares are thus
bought by the holder for 81, 800, and he turns
around and sells it at 80, if the stock is
selling there, and pockets the difference"
SPREADS AND "sTRADDLEs"
"What about Spreads and 'straddlesP"
"a 'straddle' is put and cali combined. |
The holder of one may put stock to the |
maker of the privilege OF cali for it. 'Strad-
dies come high, because there is money in
them whichever way the market may go If
the market does not go ALL but stands still,
why, the maker is in the money he has been
paid for the privilege, usually about per I
cent, or $500. A spread is also put and |
and a cali combined, but there is this differ
9nce a straddle' is made at the market
That is to say, the maker of the privilege
axes the risk that the stock in question does
lot move to any extent from the price at |
which it is selling when the privilege is sold.
IN spread the maker has more leeway If |
Western Union is selling at 20, to go back to
he old illustration, the maker of tho privi-
eca sells a ESDread saw at 81 and so IF II
,oes below 67, the holder can put the stock
md make the difference, and if it goes above
20, the holder can calf it at that price and
cap the profits. But so long as the price of
he stock keeps within those points the maker
# the privilege is safe. To put it in another
way, the holder of a 'straddle' will make if
he market for the stock he is dealing in
moves at all. The holder of a spread doesn't
lake anything until the market moves past
ertain limits. There is one thing more, the
maker of a privilege only receives the money
Or which he sells the privilege, while the
older may make thOusands-or nothing
lew York Mail and Express.